01—Abstract
Summary
Summary of the 8-K filed July 12, 2024. Cited figures are marked; the original filing is the authoritative source.
Citigroup's second quarter 2024 results (reported July 12, 2024) show a modest improvement in profitability on a year-over-year basis.
Net income attributable to Citigroup was $3.2 billiona, or $1.52 per diluted share, versus $2.9 billion ($1.33) in 2Q23. Revenues rose 4% to $20.1 billion (3% excluding divestiture impacts), helped by an approximate $400 million gain from the Visa B exchange, while operating expenses fell 2% to $13.4 billion. Positive operating leverage was partly offset by a 36% year-over-year rise in total cost of credit to $2.5 billion, driven mainly by higher U.S. cards net credit losses.
Return on average tangible common equity (RoTCE) improved to 7.2%b from 6.4%, though it declined sequentially from 7.6%. Segment performance was mixed. Markets (Equities up 37%) and Banking (revenues up 38%, with Investment Banking fees up 63%) led growth, and Services net income rose 21%.
USPB net income fell 74% to $121 millionc on elevated credit costs, and All Other posted a net loss of $402 million. End-of-period loans grew 4% to $688 billion, while deposits declined 3% to about $1.3 trillion, reflecting quantitative tightening in Treasury and Trade Solutions. Capital remained strong, with a preliminary CET1 ratio of 13.6% and a supplementary leverage ratio of 5.9%.
Book value per share rose to $99.70 and tangible book value per share to $87.53d. Citi returned about $1.0 billion to common shareholders and raised its dividend by 6%.
For investors, the quarter demonstrates progress on expense discipline and franchise momentum in Banking, Markets, and Services, but the sharp rise in card credit losses and weak USPB earnings remain key watch items. Management frames the results as evidence that its simplification and transformation strategy is working toward medium-term targets.
02—Key points
Key Highlights
- Net income of $3.2 billion ($1.52 diluted EPS), up 10% from $2.9 billion ($1.33) in 2Q23
- Revenues of $20.1 billion, up 4% reported and 3% excluding divestiture impacts, including a ~$400 million Visa B exchange gain
- Operating expenses fell 2% year-over-year to $13.4 billion, reflecting simplification savings and lower repositioning costs
- Total cost of credit rose 36% to $2.5 billion, driven primarily by higher U.S. cards net credit losses; USPB net income fell 74% to $121 million
- RoTCE of 7.2% (up 80 bps year-over-year) and CET1 ratio of 13.6%, with a 5.9% supplementary leverage ratio
- Book value per share of $99.70 and tangible book value per share of $87.53, up 2% and 3% year-over-year
- Returned ~$1.0 billion to common shareholders; dividend increased 6%; payout ratio of 34%
03—Questions
Frequently Asked Questions
Why did Citi's earnings grow while cost of credit also rose sharply?
Higher revenues (up 4%) and lower operating expenses (down 2%) more than offset the increase in cost of credit. Net income grew 10% to $3.2 billion even though total cost of credit rose to $2.5 billion from $1.8 billion, mainly due to higher U.S. cards net credit losses as multiple card loan vintages matured and inflation and higher rates weighed on borrowers.
Which business segments drove revenue growth this quarter?
Banking revenues rose 38%, led by Investment Banking fees (up 63%) from stronger debt capital markets and advisory activity. Markets revenues grew 6%, with Equities up 37% on derivatives strength, partly offset by lower Fixed Income. Services revenues grew 3%, and USPB revenues grew 6%. All Other revenues fell 22% because of closed exits and wind-downs.
Is Citi's capital position strong enough to support shareholder returns?
Yes. The preliminary CET1 ratio was 13.6%, up from 13.5% in the prior quarter, and the supplementary leverage ratio was 5.9%. Citi returned about $1.0 billion in common dividends during the quarter, raised its dividend by 6%, and cited strong stress test results as evidence of balance sheet resilience.
What are the main concerns for investors in this report?
Key concerns include the sharp year-over-year increase in cost of credit, weak USPB profitability (net income down 74%), continued deposit declines (down 3% year-over-year to about $1.3 trillion), and the net loss in All Other of $402 million. Investors may also watch whether the Argentina-related and legal expenses recur and whether RoTCE can improve from 7.2% toward medium-term targets.
04—Continue